I've done some research on DAC, but never quite understand the concept of a DAC. Maybe the people on audiogon can shed some light to my question. Right now I have my MAC as a music source, does DAC make a different?

A DAC is a Digital to Analog Converter (DAC). All cd players have built in DAC's, just as all integrated amplifiers have built in amplifiers. For those that prefer seperates, they sell preamps and amplifiers to replace an integrated amp, and a transport and DAC to replace a cd player.

The transport reads the bitsteam off of the cd, then it send it through a digital link to a DAC, which converts the digital signal to analog and then sends it on to your reciever/integrated amp/preamp/amp.

If your MAC has a digital output, you could buy an upgraded outboard DAC.

I also have few question about DAC.1. Most of the CD players come with a Digital output and a normal RCA output. If I buy a separate DAC (around $1000) with a CD player (around $1000), does it sounds better than RCA put from a high-end CD player?2. Can I connect the DAC output directly to a power amp? OR still need to get a pre-amp.

1) Possibly, but not definitely. This is a highly debateable question, with no absolute answer.

2) Only if the DAC has a volume control. If you were to run a DAC straight into the amp at full power, you may damage the amp and/or speakers. You would need a preamp, unless the DAC has a way to cut the gain (volume control).